Google Spends $26 Billion Annually to Be the Default Search Engine Almost Everywhere (and Most of It Goes to You Know Who)

David Pierce, writing for The Verge:

The U.S. v. Google antitrust trial is about many things, but more than anything, it’s about the power of defaults. Even if it’s easy to switch browsers or platforms or search engines, the one that appears when you turn it on matters a lot. Google obviously agrees and has paid a staggering amount to make sure it is the default: testimony in the trial revealed that Google spent a total of $26.3 billion in 2021 to be the default search engine in multiple browsers, phones, and platforms. [...]

Just to put that $26.3 billion in context: Alphabet, Google’s parent company, announced in its recent earnings report that Google Search ad business brought in about $44 billion over the last three months and about $165 billion in the last year. Its entire ad business — which also includes YouTube ads — made a bit under $90 billion in profit. This is all back-of-the-napkin math, but essentially, Google is giving up about 16 percent of its search revenue and about 29 percent of its profit to those distribution deals.

Most of that money, of course, goes to Apple. The New York Times recently reported that Google’s deal to be the default search engine in Safari across Google products cost the company about $18 billion in 2021.

Goldman Sachs analysts have been estimating this number for years, and $18 billion in 2021 is pretty much in line with their estimates. (Goldman conservatively estimates about $17 billion in TAC payments from Google to Apple for this year, 2023. That would be the low end — Apple gets at least that much from Google for their partnership on this.)

Apple reports this revenue under Services, which has just grown past $20 billion per quarter for Apple. So somewhere between 20-25 percent of Apple’s Services revenue comes from these payments from Google alone. You can see why Apple is rooting for Google in this lawsuit.

This whole partnership with Google is the weakest link in Apple’s overall privacy stance. Google generates so much money from search through user tracking that Apple would consider contrary to its own internal values. If Apple were to run its own search engine, it would be far more private than Google Search. But instead they partner with Google, set Google as the default for Safari on all platforms, and share in Google’s profit to the tune of around $20 billion/year.

Friday, 27 October 2023